NOVA CANNABIS INC. The Company achieved sequential free cash flow, record revenue and Adjusted EBITDA driven by strong same-store sales growth and proprietary data licensing expansion
"We are steadfast in our commitment to delivering value for our shareholders, which is underscored by our second sequential quarter where Nova has achieved free cash flow," said
FINANCIAL AND OPERATING HIGHLIGHTS
- Record revenue of
$67.7 million , a 15.0% increase from the third quarter of 2022 and a 5.8% increase from the second quarter of 2023. - For locations operational throughout the third fiscal quarter of 2023 and 2022, same-store sales increased 3.9% year-over-year.
- Record gross margin of
$17.0 million (25.1% of revenue), a 52.8% increase from$11.1 million for the third quarter of 2022 (18.9% of revenue), and a 16% increase from the previous quarter from$14.6 million (22.8% of revenue). Gross margin improvement was driven by price stabilization in theAlberta market, private label initiatives, and proprietary data licensing agreement growth. These factors have contributed to eight consecutive quarters of gross margin improvement. - Net earnings of
$2.1 million ($0.04 per share) in the third quarter of 2023 compared to a net loss of$1.5 million ($0.03 loss per share) in the third quarter of 2022. Net earnings increased by$1.1 million or 102.4% from the second quarter of 2023. - Adjusted EBITDA for the third quarter of 2023 of
$6.8 million (10.0% of revenue) compared to$2.5 million (4.3% of revenue) for the third quarter of 2022 and$5.5 million (8.6% of revenue) for the second quarter of 2023. - The data licensing program resulted in revenue of
$4.0 million for the third quarter of 2023, compared to$1.4 million in the third quarter of 2022, and represents growth of 48% compared to the second quarter of 2023. - 92 stores operating as of
November 8, 2023 , an increase of four stores since the beginning of 2023. - Nova's management team ("Management") estimates that its market share was approximately 19.1% in
Alberta and 3.5% inOntario for the third quarter of 2023, based on available industry data1. - Nova expanded its private label collaboration with SNDL Inc. ("SNDL") on
September 8, 2023 , introducing a new 1.2-gram vape to its existing large format flower offerings. From the launch of this product toSeptember 30, 2023 , 'Hello My Name is Strawberry' was the bestselling 1.2-gram vape cartridge in Alberta Value Buds stores. - Cash provided by operating activities in the third quarter of 2023 of
$5.6 million , a$2.3 million increase from the$3.3 million cash provided by operating activities in the third quarter of 2022. - Liquidity, including cash and availability under the Revolving Credit Facility (defined below), of
$10.9 million as atSeptember 30, 2023 .
SPECIFIED FINANCIAL MEASURES
Certain specified financial measures in this earnings release, including Adjusted EBITDA, are non-IFRS measures and may not be comparable to similar measures reported by other companies. This non-IFRS financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure that the Company uses to evaluate its operating performance. Adjusted EBITDA provides information to investors, analysts, and others to aid in understanding and evaluating the Company's operating results in a similar manner to Management. Adjusted EBITDA is defined as loss and comprehensive loss before finance costs; gains and losses on fair value adjustments; depreciation; impairments, lease remeasurements and other costs; and certain one-time transaction costs and restructuring costs, as determined by Management.
The following table reconciles Adjusted EBITDA to net loss and comprehensive loss for the periods noted:
Three months ended | Nine months ended | ||||||||
(expressed in thousands) | 2023 | 2022 | 2023 | 2022 | |||||
Net earnings (loss) and comprehensive earnings (loss) | 2,097 | (1,535) | 2,589 | (6,438) | |||||
Adjustments: | |||||||||
Finance costs | 1,209 | 1,063 | 3,444 | 2,902 | |||||
Net loss (gain) on fair value adjustments | 21 | 15 | (212) | (438) | |||||
Depreciation | 2,837 | 2,736 | 8,567 | 8,064 | |||||
Impairment, lease remeasurements and other costs | 347 | — | 308 | 119 | |||||
Transaction costs (1) | — | 236 | — | 1,819 | |||||
Restructuring costs (2) | 242 | — | 745 | — | |||||
Adjusted EBITDA | 6,753 | 2,515 | 15,441 | 6,028 | |||||
(1) | Transaction costs include expenses incurred in connection with SNDL's acquisition of |
(2) | Restructuring costs include expenses incurred in connection with the proposed transaction to implement a strategic partnership in the cannabis industry (the "Nova Reorganization"). |
LIQUIDITY AND CAPITAL RESOURCES
Summary of Consolidated Cash Flows
Cash provided by (used in) | Three months ended | Nine months ended | |||||
(expressed in thousands) | 2023 | 2022 | 2023 | 2022 | |||
Operating activities | 5,574 | 3,311 | 6,754 | (2,581) | |||
Investing activities | (1,194) | (1,765) | (1,942) | (6,740) | |||
Financing activities | 976 | (1,409) | 1,020 | 5,151 | |||
Net increase (decrease) in cash | 5,356 | 137 | 5,832 | (4,170) | |||
Revolving Credit Facility
Nova has an uncommitted revolving credit facility with SNDL in an aggregate principal amount not to exceed
As at
STRATEGIC OUTLOOK
Nova's strategy is to be the largest, fastest growing and most profitable cannabis retailer in
- Through its partnership with SNDL, Value Buds' private label strategy has been successfully launched in
Alberta andOntario . The private label strategy enables Nova to develop higher gross margin offerings, build customer loyalty and create long-term brand awareness. The private label strategy focuses on keystone segments, specifically large format, uniquely curated for the Value Buds consumer, and drives meaningful differentiation through the retail network. - Nova's management services agreement with SNDL enables the Company to leverage shared corporate services, contributing valuable support to scale key initiatives for an annual fee that is materially lower than the cost of building and operating the infrastructure necessary for Nova to manage those services in-house. This collaboration empowers the Company to access additional resources and expertise, enhancing Nova's ability to drive success and achieve its strategic objectives.
- The Company continues its aggressive pricing strategy to capture further market share. Nova has begun adjusting pricing across all categories in different markets to test elasticity and understand consumer buying trends.
- The transaction between Nova and SNDL to implement a strategic partnership in the cannabis industry (the "Nova Reorganization") was approved by Nova's minority shareholders who are not related parties on
May 5, 2023 . While all other provincial approvals have been received, the continued review by one provincial regulator has necessitated a further extension of the outside date for the closing of the previously-announced Nova Reorganization toNovember 30, 2023 .
CONFERENCE CALL
Nova will host a conference call and webcast at
Call Access
Conference ID: 8078331
Webcast Access
To access the live webcast of the call, please visit the following link:
https://edge.media-server.com/mmc/p/tofpdave
Replay
The webcast archive will be available for twelve months via the webcast link provided above.
For further information, refer to the Company's interim financial statements and MD&A for the three and nine months ended
ABOUT
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "continue", "anticipate", "will", "believes", "should", "plan", "intention", "expects", and similar words suggesting future events or future performance. All statements and information other than statements of historical fact contained in this news release are forward-looking statements. In particular, this news release contains forward-looking statements pertaining to: the Company's expectations regarding its growth and business strategies; Nova's private label strategy; and the Company's ability to successfully launch additional private label offerings; Nova's ability to become one of the largest cannabis retailers in
With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things: the Company's ability to identify locations for, construct and open new stores and the costs related thereto; the availability of hardware and equipment for those stores; government regulation and applicable laws will not change in a manner adverse to the Company; receipt of necessary regulatory approvals to open new stores; the Company's ability to obtain leases for new sites and attract the necessary personnel to operate new stores; demand for the products the Company sells; other factors that will drive sales growth in the Value Buds and Firesale banners, including Nova's private label strategy; availability of acquisition opportunities; sustainability of competitors' businesses and competition in the retail cannabis industry, including from the illicit cannabis market; consumer demands; and factors that influence consumer behavior.
Although the Company believes that the expectations reflected in the forward-looking statements, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations and assumptions will prove to be correct. Readers should not place undue reliance on forward-looking statements included in this news release. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause actual performance and financial results to differ materially from any estimates, forecasts or projections. These risks and uncertainties include, among other things, the risk that Nova will be unable to execute its strategic plan and growth strategy, as planned without significant adverse impacts from various factors beyond its control; business decisions and strategies of SNDL, Nova's direct majority shareholder; dependence on suppliers; potential delays or changes in plans with respect to capital expenditures and the availability of capital on acceptable terms; risks inherent in the retail cannabis industry; competition for, among other things, customers, supply, capital and skilled personnel; changes in labour costs and markets; incorrect assessments of the value of acquisitions; general economic and political conditions in
The forward-looking statements contained in this news release are made as of the date hereof. Except as expressly required by applicable securities legislation, Nova does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
1 | Source: |
SOURCE
© Canada Newswire, source
